Currys Shares Soar After Elliott and China’s JD.Com Spark Bidding War
(Bloomberg) -- Chinese e-commerce giant JD.com Inc. is considering an offer for British electronics retailer Currys Plc, raising the prospect of a bidding war after a separate approach from Elliott Investment Management LP was rejected over the weekend.
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JD.com confirmed Monday that it’s in the early stages of a possible cash bid, lifting Currys shares as much as 38%. At their intraday high, they were about 5% above Elliott’s bid of 62 pence per share, or about £700 million ($884 million), which Currys said it had rejected as too low.
Currys has attracted interest after losing almost 60% of its value in three years as shoppers cut back on pricey electronics during Britain’s cost-of-living crisis. The company said last month that Christmas sales had been robust, giving potential buyers a chance to get in on a possible rebound at a bargain price.
Under Chief Executive Officer Alex Baldock, Currys has gotten to grips with some of its biggest problems, shutting or disposing of struggling Carphone Warehouse mobile phone stores and selling off some overseas operations.
“Currys could experience powerful profit tailwinds” as it shifts to selling more services rather than electronics gadgets, analyst Ben Hunt at Investec Securities said in a note prior to the interest being revealed.
Read More: UK Christmas Retail Sales Disappoint as Shoppers Pull Back
JD.com, one of China’s largest online retailers, has been looking for new growth opportunities as the domestic consumer market slows and competition increases. The company, which provides 580 million active customers with a wide range of products from fresh food to clothing and electronics, was founded by Liu Qiangdong in 1998 and is a major rival to the Alibaba-run Tmall website.
JD.com’s interest was reported on Sunday by the Telegraph newspaper, after Currys said it had rejected Elliott’s bid.
The prospect of a major UK retailer being owned by a Chinese company or a foreign private equity firm could raise political concerns, with a British general election due this year. The scale of the share move Monday suggests investors think other bidders could emerge.
Retail magnate Mike Ashley has built up a more than 6% stake in Currys, while also owning about a quarter of AO World, an online rival that sells washing machines, fridges and other household appliances.
“Ashley will be feeling smug after his recent stake-building in the company,” Nick Bubb, an independent retail analyst, wrote in a note to clients Monday.
Currys operates about 300 stores in the UK and employs more than 15,000 people. It canceled its final dividend last year and lowered pension contributions to save cash due to problems in its Nordics business, where rivals have stepped up discounts. The company is set to sell its retail business in Greece and Cyprus for €200 million ($216 million) to pay down debt.
Read More: Currys CEO Lashes Out at UK Government on Taxes, Minimum Wage
JD.com shares traded 4.1% lower in Hong Kong on Monday.
The retailer is facing stiff competition in China from up-and-comers like PDD Holdings Inc., which is behind the website Temu, and ByteDance Ltd. In recent months, JD.com nearly doubled salaries for some of its front-line staff to boost morale and shifted its focus to smaller cities. Like many other Chinese tech firms, the retailer has also intensified efforts to expand internationally as domestic consumption struggles to recover from three years of strict Covid curbs.
In a letter to employees earlier this month, the company said it needed to “prepare for the complex competitive environment,” in part by building up logistics capabilities in “major countries” in the next three years.
“We will persistently set up international shopping platform channels to provide more low-priced, quality products for consumers and boost our supply chain capabilities overseas,” the letter said.
(Updates with analyst comment in fifth paragraph)
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